U.S. apartment owners and operators face increasing competition today from new multifamily properties and the lure of single-family housing. To attract renters? Many of these owners and operators are turning to concessions.
That’s the takeaway from the latest research from Berkadia.
According to Berkadia’s apartment concessions report released in October, more than one out of every five professionally managed apartment units across the United States offered concessions in the second quarter of 2024.
While that figure represents an increase over recent concession activity, it remains lower than what the industry has seen in the past. Berkadia reported that from the third quarter of 2009 through the third quarter of 2019, an average of 28.1% of U.S. apartment units came with concessions.
And from the third quarter of 2022 through the third quarter of 2007, that figure averaged an even higher 41.3%.
From the third quarter of 2020 through now, though, an average of just 15.2% of all apartment units in the United States came with concessions.
What has increased is the value of these concessions when compared to asking apartment rents.
According to Berkadia, from the third quarter of 2020 through the second quarter of 2024, concessions averaged 5.2% of asking rent. That is up from an average of 4.6% from the first quarter of 2010 through the fourth quarter of 2019.
It’s little surprise that the amount of concessions has increased as vacancy rates have also risen.
Berkadia said that the multifamily occupancy rate in the second quarter of 2024 stood at 94.2%. That is a dip of 50 basis points when compared to the same quarter a year earlier.
In good news for apartment operators, though, Berkadia predicts that the national multifamily occupancy rate will increase 20 basis points by the end of this year and continue to rise to 94.8% by the fourth quarter of 2025.
And that increase in occupancy should correlate to a dip in concessions.
